Floor covering cartel uncovered by French Competition Authority

In the latest in a series of cartel busting decisions, the French competition authority, l’ Autorité de la concurrence, has fined the three leading companies in the PVC and linoleum floor coverings sector and their trade association €302 million for anti-competitive behaviour which, in one case, lasted for 23 years.

The three companies; Forbo, Gerflor and Tarkett represented the majority of the French domestic market for such products (between 65% and 85% from 2001 until 2012).  They had jointly operated the cartel with the assistance and active participation of the industry’s trade association, SFEC (Syndicat Français des Enducteurs Calandreurs et Fabricants de Revêtements de Sols et Murs).

In their investigations, the French authorities uncovered three different forms of anti-trust activities.

Price-fixing

That the three main manufacturers of floor coverings in France met secretly at so-called “1, 2, 3” meetings, from October 2001 to September 2011, at hotels, on the margins of official meetings of the SFEC or through dedicated telephone lines, in order to discuss minimum prices and price increases for their products. The manufacturers also entered into agreements covering a great deal of other sensitive information, such as the strategies to adopt with regard to specific customers or competitors, organization of sales activities and sampling of new products.

Confidential information exchange via the trade association

From 1990 until the start of the competition authorities’ investigations in 2013, Forbo, Gerflor and Tarkett also exchanged, in the context of official meetings of the SFEC, very precise information relating to their trading volumes, revenues per product category and business forecasts. In its decision, the competition authority also raised the active role played by the SFEC, in supporting companies in their illegal conduct.

Non-compete agreement relating to environmental performance advertising

The three main manufacturers of floor coverings in France, together with the trade association, also signed a ‘non-compete’ agreement which prevented each company from advertising the individual environmental performance of its products.

The competition authority considered that this agreement may have acted as a disincentive for manufacturers to innovate and offer new products, earmarked by better environmental performance, compared to the products offered by their competitors.

Neither the manufacturers nor the trade association disputed the facts and all of them sought a settlement procedure. In addition, Forbo and Tarkett, leniency applicants, benefited from fine reductions corresponding to the respective dates they approached the competition authority (the sooner, the higher the fine reduction), the quality of the evidence they provided and their cooperation during the investigation.